What happened
Shares of Lowe's Companies (LOW 0.41%) were down by more than 6% at 11 a.m. today. The decline comes after disappointing fourth-quarter 2022 earnings released earlier.
Investors weren't expecting too much from Lowe's earnings after its main rival, Home Depot, similarly disappointed the market a week ago. Still, Lowe's figures were even worse than Home Depot's.
For example, Home Depot's global and U.S. comparable sales declined by 0.3% in the quarter, while Lowe's total comparable sales were down 1.5%, with U.S. home improvement comparable sales falling by 0.7%. Moreover, Lowe's full-year guidance, for comparable sales to decline 2% to flat in 2022, compares unfavorably with Home Depot's guidance for comparable sales growth to be flat in 2022.
So what
Lowe's and Home Depot had two things in common: Professional sales were better than DIY sales for both -- there's still a backlog of professional work to go through -- and they saw similar relative strength in specific categories, namely plumbing, building materials, millwork, and paint.
This encouraged CEO Marvin Harrison to argue that "we don't see any really red flags that we're concerned about because the core home improvement discretionary categories held up really well for us."
Now what
It will be a challenging year for Lowe's, and it could get even more difficult if interest rates keep rising, putting pressure on the housing market. That said, the tightening cycle won't last forever, and this isn't a structural problem with Lowe's business; it's more of a cyclical issue. So long-term holders will be inclined to brush it off if they believe in the long-term prospects for the U.S. housing market.
